Housing crisis worse under Clark's Government - Key

Migration pressures which Labour says are contributing to a housing crisis were worse under Helen Clark's Government, Prime Minister John Key said yesterday as yet another report emphasised the high price of homes in this country.

The political battle over the high cost of housing was further fuelled when Treasury warned in last week's Budget that surging migration numbers could place even further pressure on the market. Treasury expects annual net inward migration to peak at 38,000 this year but said it could be as high as 41,500.

Meanwhile, the OECD's latest Economic Outlook report said New Zealand houses prices were 66 per cent over-valued based on the long-run average ratio of house prices to rents, making them the most overvalued among 31 developed countries. Relative to incomes they were 30 per cent over-valued, a margin only exceeded by Belgium.

"We have a housing crisis, yet the Prime Minister is in denial", Labour Leader David Cunliffe said.

The OECD report confirmed what New Zealanders already knew, "property speculators and mortgage restrictions are locking them out of the dream of home ownership".

Mr Cunliffe also said the new migrants expected would require almost 13,000 new houses, with almost half of those in Auckland alone. The Government's moves to fast track the construction of new homes would do little more than handle the demand from new migrants, he said.

A Labour Government would run "a tightly focused migration programme" to manage migration "to a steady predictable moderate flow that's at a level that addresses skill shortages", he said.

But Mr Key said if that was what Labour tried to do when it was last in Government, "they weren't terribly successful cause I think it varied between minus 13,000 and plus 43,000.

"It's not actually that easy because the bit of migration that's the volatile bit is actually New Zealanders leaving."

Most recent immigration figures show there was 31,900 net inward migration in the year to March, the highest level since 2003. While the number of New Zealanders returning was at a high and the number of kiwis leaving was at a low, the number of non New Zealand arrivals at 70,650 was also at a multi year high.

Mr Key said New Zealand had positive migration for "a very long period of time" and Labour raising it now as an issue was "to a certain degree trying to play into peoples fear of that".

Mr Key pointed out that when net annual inward migration reached 43,000 in 2002 under Labour, "they didn't go this was a crisis".

Mr Key also said the OECD's analysis of house prices to rentals was "an interesting way to look at it, it's not the normal way to look at it".

But New Zealand Insitute for Economic Research economist Shamubeel Eaqub said the OECD's report - which highlighted the strength of house prices relative to rentals - suggested that immigration was not a major driver of rising house prices.

"If it was mainly about immigration we would see both rents and house prices spike up but in Auckland rental inflation was 2 -1/2 per cent while house price inflation was in double digits."

Mr Eaqub said prices were being driven up by "extraordinarily strong" interest from investors.

"If we wanted to be colourful we would call it speculation. That's really what we're talking about when we talk about house prices in Auckland - it's not about fundamental supply and demand."

Meanwhile Mr Key said Labour's claim of a housing crisis was undermined by the fact the Roost home affordability index was worse in late 2007 and 2008, but when asked, then Housing Minister Maryan Street denied there was a crisis.

"In Opposition they are screaming their lungs off but in Government for nine years they sat about and allowed house prices to double. There's just no credibility in what these people are saying."

But Mr Key yesterday confirmed that one of the Government's measures to help make homes more affordable, its latest round of RMA reforms would be parked until after the election because the Maori Party and United Future refused to support the law change.